1 00:00:09,450 --> 00:00:12,419 Sean Aylmer: Welcome to Fear and Greed: The Week Ahead. I'm Sean Aylmer and 2 00:00:12,420 --> 00:00:16,199 Sean Aylmer: as always, I'm joined by economist Stephen Koukoulas. You'll find 3 00:00:16,199 --> 00:00:18,900 Sean Aylmer: him at thekouk. com T- H- E- K- O- U- K . 4 00:00:19,380 --> 00:00:23,340 Sean Aylmer: com, and on Twitter using the handle, TheKouk. Stephen, good 5 00:00:23,340 --> 00:00:23,700 Sean Aylmer: morning. 6 00:00:24,450 --> 00:00:25,680 Stephen Koukoulas: Top of the morning to you Sean. 7 00:00:26,550 --> 00:00:30,120 Sean Aylmer: Now, Stephen top of the morning. You have a side 8 00:00:30,120 --> 00:00:32,070 Sean Aylmer: hustle going on, and I think it's time that we 9 00:00:32,070 --> 00:00:34,229 Sean Aylmer: explored this. We've been hearing for months about it off- 10 00:00:34,229 --> 00:00:37,409 Sean Aylmer: air. But, you are now a small business owner. 11 00:00:38,220 --> 00:00:38,640 Stephen Koukoulas: Yes. 12 00:00:38,700 --> 00:00:39,418 Sean Aylmer: Is that fair to say? 13 00:00:40,019 --> 00:00:40,531 Stephen Koukoulas: It is fair to say. 14 00:00:40,531 --> 00:00:43,170 Sean Aylmer: How's it going? Explain what it is, and how's it going? 15 00:00:43,710 --> 00:00:48,059 Stephen Koukoulas: About a year ago, I set up a ceramic fruit 16 00:00:48,150 --> 00:00:50,428 Stephen Koukoulas: sculpture importing business. 17 00:00:51,750 --> 00:00:51,751 Sean Aylmer: Of course. 18 00:00:51,751 --> 00:00:57,690 Stephen Koukoulas: It's called the Pink Pear and it imports these wonderful ceramic, 19 00:00:57,810 --> 00:01:03,360 Stephen Koukoulas: and fiber resin for the larger items, apples, bananas, cherries, 20 00:01:04,469 --> 00:01:07,949 Stephen Koukoulas: pomegranates. They're decorative sculptures. And just this last weekend, I 21 00:01:07,950 --> 00:01:12,390 Stephen Koukoulas: was at the Melbourne Design Show in Jeff's Shed, near 22 00:01:12,390 --> 00:01:16,920 Stephen Koukoulas: the Yarra River. And it's people buying these sculptures, for 23 00:01:17,220 --> 00:01:21,029 Stephen Koukoulas: well, decorative purposes. Indoors, outdoors and how's it going? It's 24 00:01:21,030 --> 00:01:27,000 Stephen Koukoulas: going pretty well. Despite the economy weakening, these items and 25 00:01:27,000 --> 00:01:28,708 Stephen Koukoulas: I must confess and some people have noted, they're not 26 00:01:28,709 --> 00:01:31,890 Stephen Koukoulas: cheap. There are still people buying these things. I think 27 00:01:31,890 --> 00:01:34,708 Stephen Koukoulas: they're tending to be of the demographic that are older 28 00:01:34,709 --> 00:01:37,560 Stephen Koukoulas: people, so they probably don't have a mortgage. They've probably got 29 00:01:37,560 --> 00:01:39,959 Stephen Koukoulas: a few million bucks in their super, and they're buying 30 00:01:39,959 --> 00:01:41,910 Stephen Koukoulas: these sculptures. So things are going well, thank you. 31 00:01:42,330 --> 00:01:46,170 Sean Aylmer: And when we say sculptures, we're not talking small bananas 32 00:01:46,170 --> 00:01:49,650 Sean Aylmer: here. We're talking a massive banana, or apple, or orange. 33 00:01:49,650 --> 00:01:53,970 Stephen Koukoulas: They are. They're up to 1.2 meters round for the cherry, 34 00:01:54,240 --> 00:01:56,939 Stephen Koukoulas: with the stem made of a bronze, which are an 35 00:01:56,940 --> 00:02:01,080 Stephen Koukoulas: extra 2. 7 meters tall. So they're not for every 36 00:02:01,500 --> 00:02:03,690 Stephen Koukoulas: veranda, or balcony, or anything. 37 00:02:04,260 --> 00:02:05,880 Sean Aylmer: Not for the apartment necessarily. 38 00:02:06,359 --> 00:02:09,000 Stephen Koukoulas: And just a little ad for the W Hotel here in 39 00:02:09,270 --> 00:02:13,980 Stephen Koukoulas: Melbourne, they've actually got a graffiti apple next to their swimming pool. A great big one, a 1. 40 00:02:14,400 --> 00:02:15,180 Stephen Koukoulas: 2 meters round. 41 00:02:15,510 --> 00:02:16,139 Sean Aylmer: Oh wow. 42 00:02:16,320 --> 00:02:16,440 Stephen Koukoulas: Yes. 43 00:02:17,190 --> 00:02:20,369 Sean Aylmer: Okay, pinkpear. com. au but we digress. 44 00:02:20,460 --> 00:02:20,820 Stephen Koukoulas: We do, we do. 45 00:02:21,210 --> 00:02:24,059 Sean Aylmer: Last week, a bit of news around the economy. Labor 46 00:02:24,059 --> 00:02:27,630 Sean Aylmer: Force, we had the National Australia Bank business conditions and confidence 47 00:02:27,630 --> 00:02:30,900 Sean Aylmer: survey. We had the Westpac Consumer Sentiment. But really Labor 48 00:02:30,900 --> 00:02:31,680 Sean Aylmer: Force was a big one. 49 00:02:32,370 --> 00:02:35,009 Stephen Koukoulas: The big one, and it was a good result. Clearly 50 00:02:35,010 --> 00:02:37,349 Stephen Koukoulas: the Bureau of Statistics have a bit of trouble seasonally 51 00:02:37,349 --> 00:02:41,668 Stephen Koukoulas: adjusting the data from April to May. Because of ANZAC 52 00:02:41,669 --> 00:02:43,710 Stephen Koukoulas: day, Easter, and these sort of things. But putting that aside, 53 00:02:43,710 --> 00:02:45,840 Stephen Koukoulas: it was still a great result. It was showing that 54 00:02:45,840 --> 00:02:49,169 Stephen Koukoulas: after a very weak April, at least on paper, we 55 00:02:49,169 --> 00:02:53,130 Stephen Koukoulas: had a 70, 000 plus rebound in employment. The unemployment rate 56 00:02:53,130 --> 00:02:57,209 Stephen Koukoulas: which had ticked up to 3. 7%, ticked down to 3. 57 00:02:57,480 --> 00:03:01,919 Stephen Koukoulas: 6%. Participation rate rose. We've got this indicator of the 58 00:03:01,919 --> 00:03:05,010 Stephen Koukoulas: economy, as my friends at the CBA were saying, their 59 00:03:05,010 --> 00:03:07,470 Stephen Koukoulas: economics team. It's at odds with a lot of the 60 00:03:07,470 --> 00:03:10,770 Stephen Koukoulas: economic news on the economy, weak retail sales. And as 61 00:03:10,770 --> 00:03:13,320 Stephen Koukoulas: you were saying, the Consumer Sentiment numbers were very poor. 62 00:03:13,620 --> 00:03:16,770 Stephen Koukoulas: Business conditions, business confidence are both ticking low. Not as 63 00:03:16,770 --> 00:03:20,760 Stephen Koukoulas: bad Consumers Sentiment, but still edging down. So here we 64 00:03:20,760 --> 00:03:24,120 Stephen Koukoulas: have got this jobs strength, and it is unambiguously strong, 65 00:03:24,120 --> 00:03:25,169 Stephen Koukoulas: when the economy's slowing. 66 00:03:26,190 --> 00:03:29,010 Sean Aylmer: Because Jerome Powell, the U. S. Federal Reserve Chair last 67 00:03:29,010 --> 00:03:32,849 Sean Aylmer: week, also talked about the strength in the jobs market. 68 00:03:32,849 --> 00:03:36,479 Sean Aylmer: It just seems to be a developed economy phenomenon, at 69 00:03:36,480 --> 00:03:41,369 Sean Aylmer: the moment while growth is slowing. Jobs, they're probably past 70 00:03:41,370 --> 00:03:42,930 Sean Aylmer: their peak, but they're still strong. 71 00:03:43,800 --> 00:03:47,309 Stephen Koukoulas: Yes, yes. Well, our unemployment rate hit 3. 4% in 72 00:03:47,309 --> 00:03:50,969 Stephen Koukoulas: October, so it's 3. 6%. So again, not a bad result at all. 73 00:03:50,969 --> 00:03:52,979 Stephen Koukoulas: In fact, anything sub 4% is a good result for 74 00:03:52,980 --> 00:03:55,800 Stephen Koukoulas: unemployment. There's a bit of a turning point occurring. And 75 00:03:55,800 --> 00:03:58,380 Stephen Koukoulas: even last week, it sometimes gets the focus markets, the 76 00:03:58,380 --> 00:04:01,170 Stephen Koukoulas: initial jobless claims. Which is sort of, new listings of 77 00:04:01,680 --> 00:04:04,440 Stephen Koukoulas: unemployment in the U. S. It ticked up for the last, 78 00:04:04,889 --> 00:04:07,380 Stephen Koukoulas: month or so, it's starting to increase. And it's usually 79 00:04:08,070 --> 00:04:11,159 Stephen Koukoulas: a really reliable leading indicator of U. S. labor market and business. 80 00:04:11,160 --> 00:04:13,860 Stephen Koukoulas: But again, it's not bad. It's just, reflecting the slow 81 00:04:13,860 --> 00:04:16,230 Stephen Koukoulas: down that's occurring. So, you're quite right, it's in the U. 82 00:04:16,230 --> 00:04:19,320 Stephen Koukoulas: S., the U. K., Canada. Even in New Zealand, which 83 00:04:19,320 --> 00:04:22,289 Stephen Koukoulas: was confirmed in recession last week. They had two consecutive 84 00:04:22,290 --> 00:04:25,378 Stephen Koukoulas: quarters of negative GDP. Their labor market's still resilient. 85 00:04:26,370 --> 00:04:28,799 Sean Aylmer: So, do we end up in a recession here in Australia? 86 00:04:28,799 --> 00:04:30,599 Sean Aylmer: And then what does happen to interest rates? 87 00:04:30,870 --> 00:04:33,330 Stephen Koukoulas: Well, look I don't think we're heading to a recession. 88 00:04:33,660 --> 00:04:36,779 Stephen Koukoulas: The second half of 2023 will be weak. The economic 89 00:04:36,779 --> 00:04:41,039 Stephen Koukoulas: activity indicators, particularly as they relate to the household sector. 90 00:04:41,099 --> 00:04:43,469 Stephen Koukoulas: And us consumers are weak, there's no doubt about it. 91 00:04:43,950 --> 00:04:46,020 Stephen Koukoulas: We are responding to the interest rates hikes, we are 92 00:04:46,020 --> 00:04:48,779 Stephen Koukoulas: responding to costs of living pressures. The fact that the 93 00:04:48,779 --> 00:04:51,480 Stephen Koukoulas: cost of our basket of goods and services that we buy every 94 00:04:51,480 --> 00:04:55,380 Stephen Koukoulas: month are increasing more than our wages. And that's been 95 00:04:55,380 --> 00:04:57,928 Stephen Koukoulas: the case for, well over a year now. You've got 96 00:04:57,928 --> 00:05:01,109 Stephen Koukoulas: this situation where consumers are responding, to get a recession. 97 00:05:01,110 --> 00:05:02,789 Stephen Koukoulas: This is why I don't think we're getting a recession, 98 00:05:02,790 --> 00:05:06,419 Stephen Koukoulas: this was reflecting the NAB data last week. Businesses are 99 00:05:06,450 --> 00:05:09,930 Stephen Koukoulas: still investing, they're still ramping up their CapEx. They're buying 100 00:05:09,930 --> 00:05:15,089 Stephen Koukoulas: machinery and equipment, IT. They're building buildings, things like warehouses 101 00:05:15,089 --> 00:05:19,019 Stephen Koukoulas: for logistics and transport distribution. Okay, office blocks aren't being 102 00:05:19,020 --> 00:05:20,428 Stephen Koukoulas: built in any great numbers because there's a bit of 103 00:05:20,428 --> 00:05:24,240 Stephen Koukoulas: an oversupply there. But the bottom line on business investment 104 00:05:24,240 --> 00:05:28,980 Stephen Koukoulas: will put it decent floor under GDP. And while us consumers 105 00:05:28,980 --> 00:05:32,488 Stephen Koukoulas: are hunkering down, and spending growths very, very weak. No 106 00:05:32,490 --> 00:05:36,000 Stephen Koukoulas: question. To get a recession you also need business investments 107 00:05:36,000 --> 00:05:37,799 Stephen Koukoulas: to lower, and that ain't happening just now. 108 00:05:38,160 --> 00:05:38,880 Sean Aylmer: And rates? 109 00:05:39,390 --> 00:05:45,870 Stephen Koukoulas: Rates. Look, the RBA clearly, and even the Fed who paused last 110 00:05:45,870 --> 00:05:50,309 Stephen Koukoulas: week have indicated they've probably, or possibly got another couple 111 00:05:50,309 --> 00:05:53,190 Stephen Koukoulas: of hikes to go. Same story here from the Reserve 112 00:05:53,190 --> 00:05:57,270 Stephen Koukoulas: Bank. The Labor Force numbers obviously tilted the bias towards 113 00:05:57,719 --> 00:06:00,900 Stephen Koukoulas: another hike. But not this week, but next week we 114 00:06:00,900 --> 00:06:04,380 Stephen Koukoulas: get the monthly CPI which will be very important. Plus 115 00:06:04,380 --> 00:06:07,560 Stephen Koukoulas: a range of other, partial indicators on the economy. So 116 00:06:07,890 --> 00:06:11,490 Stephen Koukoulas: it's generally the jury's out, and we are really, truly 117 00:06:11,490 --> 00:06:15,420 Stephen Koukoulas: on danger watch. If the CPI that comes out next 118 00:06:15,420 --> 00:06:18,360 Stephen Koukoulas: week is a little elevated, well the RBA probably go 119 00:06:18,360 --> 00:06:21,750 Stephen Koukoulas: again. If it happens to be a bit weaker, and 120 00:06:21,750 --> 00:06:24,779 Stephen Koukoulas: hopefully it is. Because we had last week, the U.S. CPI 121 00:06:24,779 --> 00:06:29,160 Stephen Koukoulas: came in at only, inverted commas, '4% down from 10%,' 122 00:06:29,910 --> 00:06:32,309 Stephen Koukoulas: almost a year ago. So, inflation around the world is 123 00:06:32,309 --> 00:06:35,099 Stephen Koukoulas: falling. Will that show up in Australia? If it does, 124 00:06:35,100 --> 00:06:38,250 Stephen Koukoulas: then the RBA might have as they say, " A hawkish 125 00:06:38,370 --> 00:06:40,680 Stephen Koukoulas: pause." So sounding hawkish, but not hiking. 126 00:06:41,520 --> 00:06:43,080 Sean Aylmer: Fair enough. Stephen, enjoy your week. 127 00:06:43,560 --> 00:06:44,159 Stephen Koukoulas: Thank you Sean. 128 00:06:44,849 --> 00:06:47,279 Sean Aylmer: That was a convo with Stephen Koukoulas, better known as 129 00:06:47,279 --> 00:06:51,900 Sean Aylmer: the Kouk. Don't forget pinkpear. com. au. Well worth a look. 130 00:06:51,900 --> 00:06:52,109 Stephen Koukoulas: Indeed. 131 00:06:53,129 --> 00:06:55,678 Sean Aylmer: You can find Stephen at thekouk. com and follow him 132 00:06:55,680 --> 00:06:58,919 Sean Aylmer: on Twitter using the handle, TheKouk. I'm Sean Aylmer, and this 133 00:06:58,920 --> 00:07:00,210 Sean Aylmer: Fear and Greed: The Week Ahead.